OK, I just got back from City Hall, where I was in the audience listening to a consultant from Plante Moran explain the Ypsilanti city income tax study that they’d just concluded, something which we, the citizens of Ypsilanti, paid about $22,000 for. As I recognized about half the people in the audience as local bloggers who do a much better job of covering these things than I do, I won’t go into a lot of detail, but I did want to mention a few observations before dragging myself up to bed.

For those of you not from Ypsilanti, you should know that our finances, like the finances of many cities in Michigan, are fucked. We are, as people around here like to say, teetering on the edge of receivership.

It’s the same story you see playing out all across the rust belt – manufacturing jobs are leaving, and, in their place, we’re getting Wal-Marts, check-cashing parlors, and dollar stores. Living-wage union jobs, generally speaking, are being traded for poverty-level incomes. As American industry chases cheap labor around the globe, communities like ours on the frontlines of the “old economy” are reaping the consequences.

I should point out right up front that the men and women serving on the so-called “Blue Ribbon Committee on City Finances” are good people. Some are even my friends. They’re all residents of Ypsi, and I’m convinced that they all want to do the right thing. The sad fact of the matter is, however, that there are no easy answers. We either cut costs, increase revenues, do a combination of the two, or allow the state to take away control from us.

A second thing that I should add is that I’ll most likely make a lot of mistakes in this article. When you take the fact that I came twenty minutes late to the meeting, add to that the fact that I have a somewhat poor grasp on city finances to begin with, and then factor in the fact that I hadn’t eaten in twelve hours, there’s all kind of opportunity for error.

Did I say that we’re fucked yet? And I mentioned that everyone on the panel has only the best intentions? And I warned you not to take anything I say too seriously? OK then, let’s get started.

The Blue Ribbon Committee was formed a year and a half ago, and charged with looking into our city finances and what could be done to keep us from going belly-up and floating down the mighty Huron like a mercury-filled fish. They interviewed city employees, talked with union officials, looked at local and national trends, etc. The consensus of the committee, happily, was that we had a pretty well run city. We were, at least by the measure of our regional peers, being run efficiently. (In particular, we’d been doing a damned good job of stretchng resources, and making things like firetrucks keep working well after other communities would have retired them.) Unfortunately, revenues aren’t keeping up with inflation though, and increased costs, particularly with regard to the healthcare of City employees, are beginning to push us into the red, despite all our efforts.

(The Headley Amendment and Proposal A were also cited as contributing factors to the currect situation, but they’d take too long to get into here, so I’ll just leave it at that for now.)

So, in the course of exploring areas in which savings could be had and revenues could be increased, the idea of a City Income Tax was floated… Other ideas, on the cost-cutting side, seemed to revolve around joining with neighboring municipalities to consolidate fire, police and other services — something which seems, based on what was said tonight, to be almost inevitable. (No mention of increased response times, etc, was brought up.)

The big problem in Ypsi is that approximately one-third of the land within the boundaries of the city is off the property tax roles. Most of that is due to Eastern Michigan University (EMU). (Churches and other not-for-profits account for some, but EMU is by far the largest land owner.) Adding to this problem is the fact that these entities require city services, for which they don’t contribute. In the case of EMU, there’s apparently an equation that the state is supposed to use which spells out the amount that they will contribute to the local community hosting the state facility in order to compensate for their use of services. According to the members of the panel, that amount, as dictated by this state-mandated formula, is about $600,000 annually. The state of Michigan, however, never lives up to the obligation. Last year, they contributed only $130,000. In the words of one committee member, we allow them to “freeload.”

In large part, the idea of a citywide income tax, as I understand it, was first floated as a way to tap into the EMU community, the thought being that if we can’t tax the property, then at least we can tax the income earned in the city. This, it should be added, isn’t without precedent in Michigan. As many as two dozen Michigan cities already have income taxes, including Detroit and Grand Rapids. (A large percentage of EMU employees do not live in the city, and thus don’t pay property tax either.)

The fellow from Plante Moran has apparently also just completed a similar study for Ann Arbor (one wonders how much of the work we paid for was just borrowed from their report), our prosperous neighbor to the West. In his opinion, they’re more likely to sell the idea to their residents and business community than we in Ypsi are. He suggested that if we wanted to move forward, we’d have to engage the Ypsi business community in a discussion as to how it would affect them, etc.

A man in the audience, a resident of Ypsi who is a controller for a company in Ann Arbor, indicated that his bosses had asked him to draft a contingency plan for the possibility of the income tax becoming law in Ann Arbor. (They wanted to move the company if it passed.) According to an informal survey done by the Ann Arbor Business Review, 80% of business owners said that they would consider moving.

I suggested that perhaps, if it’s true that Ann Arbor might adopt a city income tax, we might want to delay our decision in hopes of attracting some of the fleeing businesses. I thought that it was a great idea, but it was quickly pointed out to me that we didn’t have the luxury of waiting. I was also told that, even if we did attract several businesses to the city, it would take too long for the benefits to ripple though the system as tax revenue.

If I understood the fellow from Plant Moran correctly, he said that a city income tax wouldn’t really fix anything, but that perhaps it would “buy (us) some time.”

It was mentioned that if we voted to enact an income tax (a vote is necessary to do such a thing), then perhaps property taxes could be decreased to somewhat offset the burden. We would still most likely be paying more, we were told, but perhaps it wouldn’t be a huge increase. (The burdon would, under this scenario, be primarily on those working in, but not living in, Ypsialnti. At least that’s what they’re claiming.)

Ingrid, who is on both the Spitting Cat team, and the Blue Ribbon Committee, did a good job of pressing the fellow from Plante Moran for details as to how this income tax would affect lower-income families, especially those renters who wouldn’t benefit from the suggested decrease in property taxes… Basically, he said he didn’t have the data to say one way or the other…. Ingrid pointed out that this information was promised in the contract between Ypsi and Plante Moran, to which he responded that he couldn’t just make up data that didn’t exist. (I found his comment to be less than helpful.)

At some point during the meeting, I learned that the Visteon plant in town would be closing. (The rumor had been circulating for months, but apparently it’s official.) One of my questions to the Committee (I asked a lot of them) was how, if at all, this would change the findings of their report. One of the men on the committee said that not having Visteon would cut the amount collected by the income tax by $200,000. (They didn’t know off hand how much we’d lose in property taxes though.) When I followed up by asking how an income tax might affect our chances in attracting a new tenant for the soon-to-be-vacated facility, they said they didn’t know… Someone mentioned that perhaps temporary exceptions could be made in cases like these, in order to lure new companies, but they were told that special deals aren’t possible when it comes to taxes.

Some discussion was had as to what other cities, like Washington, DC and Atlanta, had done in order to turn themselves around. I’m not sure, but, if I understood correctly, in addition to implementing income taxes, these cities had earmarked some of the resulting funds for investment in local economic development initiatives. I could be wrong about that though.

It sounded as though they were projecting an additional $4.1 million to come in as a result of the income tax… I should have probably mentioned it earlier, but all people living in the city would pay the income tax, as well as people who just earned their wages in the city. In the case of business owners in Ypsilanti who do business outside the city, they would only have to pay taxes on that portion of their revenues earned here. The rate being proposed, I believe, was around 1.25%. In the case of people living in Ypsilanti but working elsewhere, income taxes would be paid first to the municipality where the income was earned (if they have an income tax). You would not, in other words, be taxed twice.

At some point, when discussing another town in similar economic straights, a committee member said that we couldn’t really make the comparison as their town had a “growth industry” — a prison. After a bit of laughter, someone else suggested that perhaps we take a few of our closing schools (which are being closed due to similar budget constraints) and convert them into jails… There were a few very nice moments of black humor.

I had one question that I didn’t ask, due to the session drawing to a close… I wanted to know more about the model that the fellow from Plante Moran used to predict the results of the income tax in Ypsilanti. If I understood him correctly, they built their model and then, in order to test it, went back and looked at other Michigan communities as they were before passing their local income taxes into law. They then checked their predictions against what actually occurred in those same cities in the wake of the income taxes and then tweaked their model accordingly. That sounded good to me until I looked back in my notes and saw that the last income tax to be passed into law in Michigan was in 1995. If that’s correct, my concern is that their model might no longer be valid. The economy has, as we all know, changed quite a bit over the intervening decade.

One last thing that I wanted to mention before going to bed… And this doesn’t pertain to the income tax but to the cost-cutting side of the equation. It was mentioned by someone on the panel that Wayne has transitioned their fire department over to a fire/EMS service model, which essentially means that they provide emergency care and transport people to the hospital. By doing this, and charging for the service, as an existing EMS provider would, they’ve been able to contribute over $200,000 per year to the city coffers. Unless someone knows a reason why this wouldn’t work, it seems like a pretty good idea to me, and, I’m thinking that it might be our only chance to keep a fire station downtown, and response times fast. It’s certainly worth considering.

All in all, it was a good meeting. It’s nice to be reminded on occasion that we have bright citizens with good questions and dedicated community leaders who are willing to step up and consider the difficult questions confronting Ypsilanti. I’m sure I could think of a few unkind things to say, especially about the numbers and the assumptions that the Plante Moran study is built upon, but all in all I get the sense that we’re making positive progress… The only question in my mind right now is, how much would the cost savings made possible though a single-payer national healthcare system offset the healthcare costs that are, in large part, driving this local economic crisis. It’s worth considering.